Abbey National, the UK arm of Spain’s Santander, became the third bank in a week to pull the sale of a mortgage-backed covered bond deal while the market-making obligations of European banks in the roughly €1,600bn market were suspended on Wednesday.

Covered bonds are backed by mortgages or public sector debt and are seen as ultra-safe because they are also guaranteed by the issuing bank. However, in September the broader credit market crisis finally spilled over into the covered bond market. Poor investor demand and higher spreads have increased volatility in the normally sedate market.